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SPRING 2005
I N T H I S I S S U E Is the globalization
Is the globalization of your company’s logistics
a fine-tuned network, or a tangled web? of your company’s
Adding muscle to the supply chain for C-TPAT
members
logistics an
integrated network,
F
Risky moves: Minimize the risks associated
with your company’s high value or hazardous
cargo or a tangled web?
Six Sigma: Why LSPs should embrace quality
management or many companies, especially outsourcing moves through the range of
Important updates for U.S. importers larger corporations, globalization is geographic resources, in search of low
a dominating factor as companies cost, quality service. Imports and exports
Ocean transportation of Hazardous Materials seek to identify the best suppliers of move in concert with those shifts, as
Boxed in: Container news services, materials and products to meet manufacturing populations also become
their needs and to help drive down costs. consumers, and providers of high tech
Offshore outsourcing
As manufacturing processes become services.
MARKET BUZZ leaner and combine with more Successful implementation of logistics
sophisticated supply chains, international activities relies heavily on the integration
Adding muscle to
traders can look forward to improved of processes, practices, and information
the supply chain for
business management of their goods and to yield meaningful cost reductions—
information from origin to destination. including procurement, manufacturing,
C-TPAT members
However, although companies rely on fulfillment, as well as customer service.
the timely movement of raw materials It demands integrated applications and
and finished goods worldwide, as well technologies for transportation,
as corresponding data, few have fully inventory/warehouse management, trade
On March 25, 2005, the Bureau of Customs integrated and automated all components and security compliance, and supply chain
and Border Protection (CBP) issued updated of their logistics process. management. Getting these processes to
security requirements for importers that are work seamlessly together is yet another
active in the Customs-Trade Partnership against Seeing the bigger picture,
hurdle. As their supply chains expand,
Terrorism (C-TPAT) program. sweating the details
many global shippers are increasingly
Some of the recent changes are based on “Companies’ international logistics
reaching out to third party providers, or
many of the recent findings by CBP in working executives are being asked to take a
logistics service providers (LSP), to help
with participants in the security program along broader, more strategic view of supply
make sense of the changes.
with recommendations that were put forth by chain management,” stated BDP
Typically, the resulting analyses identify
senior members of CBP. Many of the updated President, Richard Bolte, Jr. “The logistics
not only systems improvements in order
guidelines are meant to make the present purchase decision has become
to better analyze and integrate data from
supply chain more robust in order to achieve increasingly complex with the evolution
a wide range of internal and external
the goals set forth by the initial program: to of multi-domestic supply chains that
ensure that cargo entering the United States systems, but also the need to access
must be better aligned to yield broad-
is safe and secure. customers’ information within their supply
based cost reductions. And each time
C-TPAT is a joint government-business chains, including transportation,
you extend your supply chain the logistics
initiative where participating companies agree warehouse, and track and trace points,
challenges increase.”
to improve their supply chain security to receive as well as the less obvious, smaller
Seeing the global picture at the macro
"fast lane" border crossings and other steps along the way.
level and managing the individual steps
incentives. The new security criteria more clearly In recent years, BDP has taken
at the micro level is proving a tough
define and establish the baseline level of progressive steps to build upon existing
challenge, as manufacturing bases and
(continued on page 2) (continued on page 4)
markets continue to shift, and as
Adding muscle to the supply
chain for C-TPAT members
Inspection-free container clearance by U.S. Customs
U.S. Customs and Border Protection The steps include:
(continued from page 1) (CBP) emphasized recently that shippers, Tier One - a written supply chain security
measures that must be employed by member carriers, forwarders and warehouses that plan, to be approved by Customs, and
importers. The phased implementation adhere to specific best practices and C-TPAT certification of the business.
schedule, which is underway, applies to all C- undergo Customs verification of their supply Tier Two - a compliance check of the
TPAT Importer members, so current members of chain security will benefit from a “green foreign elements in the supply chain (foreign
the program should review their security profiles lane” approach for their ocean containers. suppliers must have limited access, on-duty
that were submitted and accepted by CBP. Best practices, in this instance, will require security personnel, employment screening
What’s New? selection of smart box containers, and proper paperwork). This tier assures
Employee identification system: Importers implementation of a secure supply chain, expedited passage through Customs.
must have a system in place to ensure that using Customs-Trade Partnership Against Tier Three - use of smart containers
their company can identify workers, Terrorism (C-TPAT) certified carriers, and by shippers, which must be equipped
contractors and visitors that are present in any possibly routing shipments through a (eventually) with anti-tamper technology
of their U.S. locations. Container Security Initiative (CSI) port. and exported from CSI-approved ports.
Partners: Importers must have a Currently, CBP is stationed in 36 ports CBP has stated that, “non-C-TPAT shippers
documented and verifiable process to show outside of the U.S. It comes as no are six times more likely to undergo a
they have received certification that their coincidence they also happen to be the Customs security inspection at a U.S. port,
business partners in the importation of goods world’s largest ports. than members.” By mid year, Customs is
are presently active in the C-TPAT program, or The green lane validation is part of a planning to post validated and certified
are following the security guidelines set forth three-tier approach for C-TPAT participants. C-TPAT partners on a secure, members-only
in the program. website for those companies that want
CBP states that where an importer third-tier clearance.
outsources or contracts elements of their
supply chain, such as a foreign facility,
conveyance, domestic warehouse, or other
elements, the importer must work with these
BOXED IN
business partners to ensure that pertinent
security measures are in place and adhered to
throughout their supply chains. The supply Safer containers Boxship orders increasing
chain for C-TPAT purposes is defined from In April, the U.S. Dept. of Homeland According to The Journal of Commerce
point of origin (manufacturer/supplier/vendor) Security planned to begin testing publisher Commonwealth Business Media,
through to point of distribution. prototypes of the smart box security ship-owners are still ordering record numbers
Containers: Importers must have a process device that will be attached to containers of containerships despite rising prices,
in place to verify what order(s) are contained destined for the U.S. While in transit, the stalling charter rates and softening freight
in the shipping containers by way of piece
box would use sensors to inspect the rates as they bet cargo volumes will continue
count, quantity and description of the goods,
container and trigger an alarm, if it to outstrip the supply of new tonnage in the
and must be able to quickly identify any
detects anything inside that is not on its coming years. As of the end of April, orders
overages or shortages that may have occurred
computerized manifest. A communications were 65 percent more than at the same
from the point of load to final unloading
system will be able to send information time last year. The ordering boom also could
location in the United States.
to the appropriate authorities. Once a be slowed by signs that the explosive rally in
For more information on C-TPAT and the new final smart box design is selected, it is charter rates might be peaking as owners
requirements, visit CBP’s website at anticipated that, following tests on 1,000 fear hire rates won’t remain at current record
http://www.customs.gov/xp/cgov/import/comm containers, the device would be officially levels for long enough to cover their
ercial_enforcement/ctpat/criteria_importers/ introduced early in 2007. investment in new ships.
Virus attacks and damage increased last year. IT systems were hit with 50 percent more viruses in 2004 than the year before, and the
damage done continues to grow, says InformationWeek, according to a Virus Prevalence Survey of 300 companies and government agencies.
Respondents reported 392 incidents per 1,000 machines, and when 25 or more PCs or servers were infected, system downtime increased by
12% in 2004 over the previous year. The cost of recovery averaged $130,000. Ninety-one percent say the threat is getting worse; no one says it
is lessening.
The cost of spam in lost productivity reached $21.58 billion in the U.S., says a survey by the National Technology Center. This is based on
average daily deletion of spam multiplied by the number of online users.
Identity theft continues to be the top U.S. fraud-related complaint (39 percent) according to statistics from the Federal Trade Commission.
The total number of complaints rose 17 percent. The second highest number of complaints was for Internet auctions (16 percent). Credit card
fraud was the most common identity theft.
w w w. b d p i n t e r n a t i o n a l . c o m 2
every time you move this product, or the
Risky moves frequency of claims is high—there is
something not right here.’ Or perhaps there
Managing Your Global Transportation is a higher than normal rate of damage for
the cargo. That means applying BDP’s
experience and going back to customers
and providing solutions on how they can
The impor tant role of risk The per fect match limit their loss/hazard exposure.” That can
management Kline pointed to the basic but critical need be as simple as selecting a different
Shippers select their transportation and to match carriers with cargo. “If we’re shipping package or a different type of
logistics resources after careful shipping temperature-sensitive cargo, we container, Kline notes, “either because we
consideration and an in-depth evaluation, want to be able to find the best reefer line learn bags are being ripped or drums are
regardless of whether the relationship is or container out there,” he said. In addition not positioned securely while in transit.”
designed to be short or long term. The goal to obtaining the best rates, it means The shippers’ third party provider should
is to bring the best to the table, and to identifying who has the best or newest investigate packaging and warehousing, as
maximize the opportunities for success and equipment. This helps take as much risk out well as the safety record of carriers. For
minimize and eliminate potential problems. of the move as possible. Additionally, BDP instance, there may be a history of claims
Moving cargo is a risky business. The key wants to provide insurance products to within the past year due to rough handling,
is to reduce the probability of risk. customers, so if or when an exceptional or perhaps additional staff training is
“Shippers’ supply chain partners that take event occurs, the client is able to recover required. “We are in a unique position to
risk management seriously are not only maximum cargo value. provide that service on behalf of our
doing themselves a favor, but they are also For transportation companies, effective clients,” Kline added.
providing a major benefit to their clients,” risk management begins with the
says Allan D. Kline, BDP Risk Manager - identification and evaluation of high
Transportation. “BDP appreciates and probability hazards and exposures leading to “Early intervention is a
understands the diverse range of risks that the most appropriate course of action— must. We want to be in a
can affect our clients. We aggressively apply whether to buy insurance, or select another
risk management to protect customers and method to mitigate the exposure. “When risk
position to identify problems
improve service while reducing the management is an integral part of a as early in the process as
opportunity for loss as the cargo moves transportation service provider’s culture, the
throughout the process. possible.”
customer certainly benefits,” Kline added.
“They see their resource is more
According to Kline, all modes of
“When risk management is responsible as they match the best carriers
transportation are equally vulnerable. For
with the scope of goods and use their
an integral part of a industry expertise to minimize the risk of
him, it goes back to a basic quality issue.
“You cannot eliminate all risk and therefore
transportation service any damage to that product or cargo.”
all damage, but events born of
Since September 11, 2001, risk
provider’s culture, the management activities have become more
carelessness should not happen. We want
to reduce as much risk and prevent as
customer certainly benefits.” focused within companies. With an
many opportunities for problems as
Allan D. Kline, BDP Risk Manager - increased emphasis on safety, security and
possible for our clients. We constantly ask
Transportation environmental issues, risk managers are
ourselves, what can we do to work with our
now much more a part of the fabric of the
own resources to improve their processes?
“Effective risk management benefits our business than just a few years ago. While
Early intervention is a must. We want to be
clients in two ways. First, it enhances those issues have always been there, now
in a position to identify problems as early in
service quality, broadening our command of the stakes are higher, the focus is more
the process as possible.”
the issues that can affect customer’s intense. Risk managers now have more
That is why BDP has a centralized claims
shipments: We evaluate vessels and carriers visibility within their companies.
capability. BDP can track, monitor and see a
more closely, leveraging our extensive snapshot of claims and all commodities and
Evaluating and minimizing risk
industry knowledge and experience. Second, vendors involved in the process. “Because
Every risk is different. Each is exposed to
it continuously raises the quality bar of we operate a variety of evaluation matrices,
so many variables that a certain percentage
BDP’s practices, so customers are exposed we are able to identify early on if a trend is
of all cargo is subject to damage, no matter
to fewer opportunities for loss or hazard developing, and communicate with all
how much care is taken. There is a
losses, which they may ordinarily encounter parties,” Kline noted. “The objective is
percentage of cargo damaged due to the
in the marketplace. From an ROI standpoint, prevention, addressing practices before
inevitability of risk and a percentage due to
risk management works to dramatically help they become problems.”
poor practices.
keep our service pricing even more
“It is important for shippers to have the For more information or questions on
competitive. Smarter forwarders are more
caliber of resources that can identify those Risk Management, contact Allan Kline at
reliable for shippers. We want our customers
issues,” Kline stressed. “Resources that will akline@bdpnet.com, or (215) 629-8272.
to benefit from this as much as we want our
go back to their own vendors and to their
own company to benefit.”
carriers and say, ‘This ship has a problem
3 w w w. b d p i n t e r n a t i o n a l . c o m
architecture, better enabling BDP to deliver through BDP office locations, strategic
(continued from page 1)
service-based solutions to customers.” partners, and agent partners in at least
Is the globalization of Essential international trade services for 140 countries,” said Peter Huels, Managing
BDP customers will be the first deployment Director of BDP’s Global Network Group.
your company’s logistics on the SeeBeyond platform. These global Although BDP already has a substantial
an integrated network, regulatory compliance and documentation
services, residing within the BDPXpedion
network in place, the company is looking to
not only increase that presence but also
or a tangled web? environment, include Denied Party Screening, continue to establish relationships with the
U.S. Export License Determination, Global best resources outside the U.S. on behalf
infrastructure, identifying the need to deploy Classification, AES and Documentation. of customers.
a common platform across its global Xpedion is becoming the foundation for “As our clients continue to migrate
organization to minimize operational costs delivery of comprehensive, high-value manufacturing from Europe and the U.S. to
and maximize the efficiency of its knowledge and services to BDP customers. Asia and Latin America, BDP is committed
transportation and logistics services. A number of significant components of to having a presence wherever that may
“Keeping up with global changes is only Xpedion are operational today as BDP be,” Huels pointed out. “It’s not about how
the price of admission, “Bolte added. advances a multi-year migration to Xpedion many shingles branded with our company
“Anticipating what’s next on the change across all required business capabilities logo we are able to hang outside of offices;
horizon becomes even more critical if we are and all customers, large and small. it can be a partner who knows how to do
to provide added value to clients. With a business there, who understands the needs
historic commitment to technology innovation “Each time you extend your of our customers’ vertical markets, and
dating back to the late 1970s, information who understands process management and
quality has long been one of the currencies supply chain the logistics is technology-enabled to share the kind of
of our service. The increasingly complex trade data which yields the visibility customers
facilitation functions we provide demand a
challenges increase.” demand. Above all, it has to be a top-
robust information delivery platform to BDP President, Richard Bolte, Jr. notch, reliable partner. And as our BDP
support the supply chain management needs footprint grows deeper in regional markets,
of our customers…enhancing the delivery of A network of resources we better serve our customers, and in
knowledge and services to our customer In addition to integrated logistics particular our global process customers,
base around the world.” capabilities, of particular value to shippers who want the high level of response and
“In conjunction with ongoing internal are those LSPs with reliable global support that we deliver.”
development programs for BDPXpedion®, networks in place, who can work At the end of the day, by taking an
our global business operating system, our successfully with their partner resources, integrated approach, shippers can greatly
new SeeBeyond® platform will enable the and who have superior data access. LSPs increase the efficiency of their supply
unification of BDP’s global IT infrastructure, with company offices and strategic partners chains. For true supply chain integration,
providing a more flexible and robust in key markets and a network of agent that means companies and their
communication mechanism for our clients,” partners in many other markets have much resources/partners must be connected—
said Mark Stocksdale, Chief Technology to offer their customers. systems and people—to achieve superior
Officer, BDP. “It will also support our “Our target is to have a solid presence supply chain visibility that leads to
migration to a planned service-oriented substantive cost reductions.
Of fshore outsourcing
While it is true that a growing number of service jobs are one-third of India offshoring is performed by U.S. companies,
moving out of developed nations, e.g., 3.3 million business which returns dollars to the U.S. economy as earnings.
processing jobs are expected to leave the U.S. by 2015, according
Did you know?
to Forrester Research, however, the U.S. economy churns two
q Twenty percent of Global One Thousand Companies are engaging
million jobs each month. Over time, far more are replaced than
in offshore IT outsourcing (AMR Research)
lost. In fact, the U.S. lost two million jobs to global trade during
q Eighty-six percent of midsize and large U.S. companies expect
the past 20 years but in the past 10 years added 35 million new
offshore IT outsourcing to increase this year (DiamondCluster)
ones, according to the McKinsey Global Institute.
q Seventy thousand insurance jobs in the U.K. or about 20 percent
Ninety percent of workers who lose jobs to offshore outsourcing
of the (industry’s) workforce, could move to India by 2010
are rehired in a comparable position at 95 percent of their original
(Accenture)
salary, says Kevin Parikh of Gartner, a research firm. What’s
q Two million jobs and $365 billion in operations will be moved
more, for every dollar spent on a process outsourced to India, the
offshore by 2008 by the top 100 financial institutions (Deloitte
U.S. economy gains $1.14, suggests a recent McKinsey study.
Research)
More than half goes back to the original employer as cost savings,
enabling the company to expand operations at home. And almost Data source: UK&USA magazine, a publication associated with
the British-American Business Council.
w w w. b d p i n t e r n a t i o n a l . c o m 4
Best of the best Terrorist attacks globally rose last year to
approximately 650 from 175 in 2003,
Why LSPs should according to congressional aides briefed by
the U.S. State Dept. and intelligence officials.
embrace Six Sigma
build momentum,” Messick pointed out. Growth across the chemical industry has
“We chose to introduce the program slowed somewhat from the intense pace of
through the DMAIC (Define, Measure, 2004, reported The Wall Street Journal.
Analyze, Improve, Control) process—a very However, analysts said slower growth is
sophisticated measurement system for unlikely to adversely affect the industry’s
existing processes that enables you to recent run of strong earnings. Makers of
ompanies serious about
C performance measurement and
improvement are implementing
formal programs that will help take them to
identify the variables in your processes and
address them. As you reduce those
variables, there is a greater consistency in
what you can do. The consistency is the
commodity chemicals are enjoying strong
global demand and tight supply. Globally,
utilization rates for chemical plants are above
95 percent.
the highest levels of competency, while
increasing their competitiveness. Six Sigma improvement.”
is one of the most popular and for a good Air passengers in the U.S.
reason: it works. In the ten years since its We are confident that Six Sigma face more scrutiny
development, Six Sigma has been embraced will help BDP become more even The U.S. government plans to begin
by thousands of companies worldwide and collecting the full names and birth dates of
has racked up big numbers when it comes more efficient and more effective, air travelers this summer in its latest effort
to productivity and cost savings. to screen passengers for possible links to
as we continue to grow globally.
“BDP has used formal improvement and terrorism, reported USA TODAY. The
development programs for many years,” Joe Messick, BDP Vice President—Six Transportation Security Administration (TSA)
Sigma Business Processes will notify airlines, travel agents and online
said Joe Messick, BDP Vice President—Six
reservation systems that they will be
Sigma Business Processes. “For us, it has
required to ask travelers for their legal
been a continuous process; it included our While Six Sigma creates internal gains for
names and birth dates when booking
Quality Process, our ISO 9000/ISO companies that adopt the program, some of domestic flights. Travelers will be encouraged
9001:2000 certifications, and then our the biggest winners are on the client side. - but not required - to give the personal
internal Operational Excellence program, “Our clients also reap the benefits of BDP’s information. Under the current system, only
which was very close to what is today called enhanced performance capabilities,” a last name and first initial are needed to
a lean Six Sigma program. Operational Messick noted. “Any program that provides reserve a flight. Passengers who don't
Excellence was geared to the development pluses for customers is a winner. Six Sigma comply with the request will dramatically
of baseline data and the development of gives us another opportunity to see what increase their chances of being stopped at
systems to give us that data.” we do from an outside view—it helps us to airports for questioning or pat-downs, the
see our processes from the client side, and TSA said.
BDP formally launched Six Sigma earlier
The government's long-awaited takeover
this year. make adjustments that provide value.”
of background checks from airlines is getting
“We are confident that Six Sigma will help As with any companywide program, the
a 60-day test run starting in August. Two
BDP become more even more efficient and keys to success are top-down management airlines will begin transmitting full names and
more effective, as we continue to grow support. BDP’s support group consists of a birth dates of each passenger to the TSA for
globally,” Messick continued. “It provides Six Sigma Executive Management Team, a comparison with a terrorist watch list. Other
the tools and techniques within an overall Deployment Team, and an Infrastructure domestic airlines will follow over the next
strategic approach. Team consisting of Champions, Process 18 months. The new program, called Secure
“Shippers should ensure that their Owners, Financial Representatives, Black Flight, comes on the heels of a failed
resources, especially their logistics service Belts and Green Belts. (Black Belts are the government effort to collect passengers’
providers (LSP), are also on board with Six dedicated project leaders and Green Belts personal information. The TSA killed a
are in support roles.) “Although the program known as CAPPS II last summer
Sigma. It doesn’t make sense for
amid concerns, some from within TSA, that
companies to be performing at one level, Infrastructure Team is the driver of the
it was too intrusive. Millions of passengers
while their outside resources are operating initiative, at BDP we are clear that
a year are given extra airport scrutiny or
at a lower level.” performance and continuous improvement told they cannot board flights because
As companies eagerly acquire the Six are also the roles and responsibilities of their names resemble those of terrorism
Sigma process, it is important to each and every BDP member,” added suspects. The TSA also will compare
understand that improvements will be Messick. “It is through individual effort that passengers' names with the government’s
realized over a period of time and that they, we will achieve optimum success as we comprehensive watch list. Airlines screen
in turn, become foundations for future move toward excellence. We are fully travelers against a partial list that omits
improvements. committed to try to reach that goal because names the government considers too
“We are deploying Six Sigma in a way that it fits perfectly with our vision to be the best sensitive to release.
ensures a continuum of communications to provider of global logistics solutions.”
5 w w w. b d p i n t e r n a t i o n a l . c o m
REGULATORY WATCH I M P O R TA N T U P D AT E S
PERIODIC UPDATES ON U. S. CUSTOMS POLICIES AND OTHER REGULATORY ISSUES
How to handle CBP duty assessment on impor t cargo
overages and shor tages
Importers to the U.S. are often unsure as to the proper Quantity discrepancy resulting in a revenue-related error of
method of handling overages and shortages found in less than $20
containerized cargo, and to a lesser extent, bulk cargo. The Errors less than $20 may be reported on a quarterly PEA
situation arises when the container is unloaded at the importer’s tracking report filed with CBP. (CBP will exercise its
warehouse or distribution center and on outturn contains either administrative exemption authority and disregard any additional
more or less than invoice and packing documents indicate. A amount due CBP, as well as disregarding any refund due the
procedure is usually in place for the receiving clerk to note the importer for these small discrepancies.)
discrepancy and advise the accounting department, which then
Other discrepancies
takes or gives a credit for the difference.
In addition to internal accounting, a procedure must be in Errors other than quantity may also be reported using the
place to assure that Customs and Border Protection (CBP) is in above procedures, e.g., country of origin, classification,
the loop and advised when a discrepancy occurs. CBP has valuation, charges, etc. (Quota merchandise, and a valuation
devised two very similar procedures for amending entries: the discrepancy of $10,000 or more must be reported through an
Supplemental Information Letter (SIL), and the Post Entry individual amendment letter, even if less than $20 is involved.)
Amendment (PEA). In the near future, the SIL will be eliminated, Quarterly reporting of Post Entry Amendments
or rather blended into the PEA. Quarterly reporting will only be submitted for PEAs under $20.
Liquidation is the final determination by CBP that all is correct The quarterly report must be formatted in an Excel spreadsheet
with the entry. At liquidation, the entry is either “no change,” and presented to CBP on a disk. The same elements used for
“additional duty due,” or “refund due the importer.” Liquidation the adjustment cover sheet must be used to create the
occurs 314 days after entry filing. In order to allow importers to spreadsheet with an additional element indicating the
make amendments to entry summaries already filed but not yet appropriate quarter. No additional payment need be attached
liquidated, Customs implemented the SIL and PEA programs. and no refund will be made to the importer.
The Supplementary Information Letter normally covers less
routine discrepancies and generally results in a refund of duties Post summary adjustment
or a bill for additional duties. The cover sheet provides all necessary elements needed to
For recurring discrepancies, usually amounting to very little process both the SIL and PEA. A narrative section is included for
revenue, e.g. small quantity discrepancies, Customs designed explanation. Separate sheets may be submitted if additional
the Post Entry Amendment (PEA). This allows importers to file space is required. The cover sheet must be used in filing the
discrepancy reports on a quarterly basis. SIL and PEA. Two copies are required by Customs. A third copy
Both revenue-related and non-revenue related errors must be should be included and retained in the importer file.
reported to CBP. Revenue-related errors are those that affect
Infrequent quantity discrepancies
the amount of duties, taxes, and fees applicable to an entry.
Some importers have found that it is not worth the expense
Discrepancies are reported to Customs in one of two ways:
and inconvenience of formatting and filing a disk in the case of
s Through filing an individual SIL amendment letter upon
discovery of the error, or one or two (less than $20) discrepancies over a three-month
s Through filing a quarterly PEA tracking report
period. They have opted to complete and file an individual paper
copy of the PEA when the discrepancy is first noted. Conversely,
Quantity discrepancy resulting in a revenue-related error of importers with many small discrepancies have found quarterly
$20 or more reporting very efficient.
For errors of $20 or more, or any dollar amount relative to
antidumping or countervailing duty, an individual SIL amendment
For more information on any of these or other import
letter must be sent to Customs upon discovery of the error along
topics, contact Michael Ford, Vice President, BDP
with a corrected entry summary (Cf-7501), and any additional Regulatory Compliance at mford@bdpnet.com, or
payment or request for refund. (215) 629-8924.
w w w. b d p i n t e r n a t i o n a l . c o m 6
for U.S. IMPORTERS
Watch out for alligators determine. Domestic merchandise grown, produced, or manufactured
in the United States, (D) also includes imported merchandise that has
ARE YOU DECLARING THE CORRECT COUNTRY OF ORIGIN? been enhanced in value or changed in condition by further manufacture
Did you hear the one about the ten-foot alligator that was sunning or processing in the U.S. The “F” designation covers foreign
himself on the bank of the Savannah lagoon? Actually, someone merchandise that is exported in the same condition as when imported.
casually commented that there are more alligators lurking in the Goods exported to Canada, Mexico, Chile or Singapore (and soon
Customs Regulations than in the states of Georgia, Florida and Australia, Morocco, Bahrain, Thailand, and all of Central America) have
Alabama combined. This comment seems apt in regard to a recent their own individual, and rather complex, rules of origin. In the event
shipment of dressing gowns imported through the Port of Philadelphia a free trade agreement (FTA) certificate of origin attesting the goods
with Taiwan declared as the country of origin. The goods were loaded originate in the U.S. is requested, seek advice prior to completing the
on the exporting carrier in Taiwan and the seller’s address on the form unless you have a good understanding of that particular FTA’s
commercial invoice was Taiwan. However, in a compliance review it rules of origination.
was determined the country of origin of the gowns was actually China. On import shipments, rather than D or F, the actual country of origin
A penalty was assessed in the amount of $60,000, which is still must be declared, which in many cases is not the country of
under petition. exportation, e.g., dressing gowns. Country of origin is the country of
In October 2004, Customs and Border Protection (CBP) issued a manufacture, production or growth. In the case of multiple countries of
memorandum to all ports directing verification of country of origin on production, further work or material added in a second country must
certain import entries. If incorrect origin was declared at entry, a result in a substantial transformation in order for this second country
penalty claiming gross negligence was to be issued. (four times the to be considered the country of origin. A substantial transformation
loss of revenue or 40 percent of the shipment’s value). The October generally means a new and different article of commerce. The
memorandum directed review of certain textile apparel. The lesson substantial transformation rule does not apply to countries with which
here is to ensure that the commercial invoice received from your the U.S. has free trade agreements. Those agreements have their own
supplier clearly indicates country of origin. unique rules of origin.
On export shipments, you must declare whether the goods are These rules definitely qualify as mean and hungry alligators.
Domestic (D) or Foreign (F). That’s usually not too difficult to
Understand your Special Classification Programs
In Compliance Audits that BDP conducts for clients, we have beneficiary country), where it is painted and a belt-loop attached.
tracked a trend in which frequently the importer does not have The flashlight is then tested and individually poly-packed for retail
adequate justification for a claim under the older special import sale. Value added in the Philippines is 40 percent. Upon entering
programs. Most of these accords allow free or reduced rate entry the U.S., even though it satisfies the value-added requirement,
for a host of goods. However, just because a product comes from the flashlight is not eligible for GSP as it is not the growth,
a particular beneficiary country and the Harmonized Tariff number product or manufacture of the Philippines. The item was a
is appropriate for that country, it is not adequate justification for a flashlight when it entered the Philippines and is still a flashlight
claim. The importer must be able to substantiate that the conditions when leaving the Philippines.
pertaining to that agreement have been satisfied. Now, if you have substantially transformed a third-country
Example: GSP (Generalized System of Preferences) is the oldest material into a new and different article of commerce, then that
and largest special import program covering goods from 150 is a different story. In that case, a GSP claim would be
different countries. Even though the example is GSP, all of the old appropriate, assuming the other conditions have been satisfied.
special trade programs (Caribbean Basin, Israel, etc.) require the For instance, hollow aluminum tubing is produced in China (not a
following: beneficiary country). The ten-foot long tubes are sent to the
s The article must be the growth, product or manufacture of the Philippines (GSP beneficiary country), where they are cut into
beneficiary country, not merely an enhancement of a product nine-inch lengths, painted, fitted with electrical components, bulb
from another country and lens. GSP treatment would be appropriate when the flashlight
s The article must be imported directly from the beneficiary entered the United States.
country into the United States If you claim free or reduced duty based on any of the special
s The direct cost of processing in the beneficiary country is not classification programs, be certain that you have some documentary
less than 35 percent of the FOB (foreign port) value basis for the claim. At the very least, the commercial invoice should
For instance, a basic flashlight is produced in China (not a state that the item is the growth, product, or manufacture of the
beneficiary country). The flashlight is sent to the Philippines (GSP beneficiary country.
7 w w w. b d p i n t e r n a t i o n a l . c o m
Ocean transportation of Rag trade to riches
Hazardous Materials Amid calls of “over-protectionist” by Chinese officials and as
the U.S./European Union and China review their respective
Package descriptions positions on American imports of Chinese textiles, recent
In the Winter 2005 issue of BDP Gateway, we reported the package figures from the China Chamber of Commerce actually showed
description for ocean transportation requires that the actual package a slowdown in the pace of exports. Textile exports to the U.S.
description be indicated on the ocean transport document. This is not totaled $360 million in March 2005, up 39 percent from a
a mandatory entry but it is a requirement, for example, for shipments year earlier February. Apparel exports to the U.S. rose 49
to Italy and to certain ports in Spain. The ocean transport document percent to $740 million. This was a slower pace than
must list the actual packaging, i.e. Steel drum (1A1). It is possible February, when China’s apparel exports to the U.S. more than
that this requirement will become standard for all ocean shipments doubled from a year earlier, after rising 80 percent in January.
in the near future, as it is already required for air freight. Realizing China’s exports of textiles and apparel to the European
that this could incur tremendous expense for companies—to Union rose 16 percent to $390 million and 8.6 percent to
update/upgrade present computer systems/programs—BDP will $690 million, respectively, in March. Apparel exports nearly
monitor these developments, and explore avenues to avoid or block tripled, after climbing 47 percent in January.
the requirements. Worldwide, Chinese textile exports in March rose 13 percent
Segregation group from a year earlier to $3.2 billion, but total apparel exports fell
On January 1, 2006, another entry that will become mandatory on 2.3 percent to $4.67 billion.
the ocean transport document is the requirement that the segregation
Resource: The Wall Street Journal
group be shown for certain entries, i.e. N.O.S. proper shipping names.
The IMDG Code clearly states that it is the responsibility of the shipper
(consignor) to determine the proper segregation group (if any). The
appropriate entries in the IMDG Code are found in part 5.4.1.5.11 and
in part 3.1.4.
Container seals
A frequent issue is that of container seals. There are steamship
lines that require “High Security Seals” for containers. The question is,
“What is a high security seal?” While there does not appear to be A quarterly publication for BDP International clients and trade partners.
specific regulations that define a high security seal, a good indication Send comments, suggestions, plus name/address changes to:
is the standard that the State of California applies: Arnie Bornstein, Director Marketing & Corporate Communications
California Vehicle Code Section 32001 (c) (5)(A): “The enclosed BDP International, Inc.
cargo body, when the display of placards is required pursuant to World Headquarters
510 Walnut Street
Section 27903, shall be locked and remain locked during transit of the
Philadelphia, PA 19106, U.S.A.
hazardous materials so as to prevent any unauthorized entry…” 215.629.8493 or abornstein@bdpnet.com
California Law Enforcement interprets this to mean that the seal
Editorial Advisor:
must be strong enough to reasonably withstand attempts to break in. Michael Ford – Regulatory Compliance and Quality.
BDP was advised that this is considered a force that exceeds 2000
Production: King’s Road Consulting &
lbs necessary to break the seal. Wordsworth Design, Philadelphia.
For more information on these and any other HazMat topic, contact Old York Road Publishing, Ivyland, Pa.
Torsten (Tom) Helk of BDP’s Corporate Compliance Department at
helkt@bdpnet.com, or (215) 629-8263.
Pilot error
In his “On the Road” Business Travel section of The Wall Street
BDP U.S. locations: Atlanta, Baltimore, Boston, Charleston, Charlotte, Chicago,
Journal, reporter Joe Sharkey had this incredible tale to tell: Cincinnati, Dallas, Edison NJ, Grand Rapids, Harrisburg, Houston, Indianapolis,
A uniformed pilot waits impatiently at a checkpoint for 10 minutes JFK/NY, Laredo, Los Angeles, Miami, Milwaukee, Norfolk, Philadelphia,
while two screeners from the Transportation Security Administration Philadelphia Airport, San Francisco, York PA.
scrutinize every item in his carry-on bag. After he was allowed to go Subsidiaries: BDP Asia Pacific, BDP Canada, BDP International N.V. (Belgium),
on his way, he explained why it took so long. “They told me that they BDP International S.A.S. (France), BDP International GmbH (Germany),
had to make sure I wasn’t carrying anything that would allow me to BDP International Srl (Italy).
take over an airplane,” he said, rolling his eyes. Joint Ventures: BDP/Bernard, BDP Interamerica, BDP South America.
Last week, reports from several government departments BDP International has Global Network Partners in more than 140 countries.
confirmed what most business travelers and other frequent fliers
already knew; after spending more than $5 billion in federal funds
on the agency, airport security is hardly any better now than it was
before 9/11.
www.bdpinternational.com
